As we head into another big football weekend, a budget Super Bowl of sorts is playing out on Capitol Hill, where the 12 members of the bipartisan Super Committee are making a desperate fourth-quarter push to negotiate a major deficit-reduction package.
With the national debt now in excess of $15 trillion, exceeding the nation’s annual economic output for the first time since World War II, the stakes couldn’t be higher for the Super Committee, Congress, and the Obama administration as they seek to rein near-runaway deficit spending.
The Super Committee was handpicked by congressional leaders to find ways to reduce deficits by at least $1.2 trillion over the coming decade and report back to Congress by next Wednesday. The committee was created under legislation passed last summer that raised the federal debt ceiling and trimmed spending. If the Super Committee fails to reach agreement on a plan, then automatic cuts in defense and domestic programs kick in beginning in 2013.
In the greater scheme of things, slowing the rate of growth of federal spending by a total of $1.2 trillion over the next 10 years ($100 billion a year or so within a nearly $4 trillion annual budget) shouldn’t be a heavy lift. But profound differences between the two parties over taxes and entitlement spending in a politically charged atmosphere has put a deal well out of reach until now.
The tax debate has been greatly complicated by a long-standing feud over whether to extend the Bush era tax cuts that are due to expire at the end of 2012. Republican calls for extending those tax cuts would cost the Treasury about $4 trillion over the coming decade. Democrats and President Obama want to preserve a portion of those tax cuts, but only the $3.2 trillion over the coming decade that would benefit the middle class.
As the growing cloud of pessimism about Super Committee success infects Capitol Hill, here is a rundown of the likely scenarios:
Throw in the towel – The conventional wisdom is that committee members are hopelessly deadlocked over taxes and spending issues and will call it a day early next week by announcing a compromise is impossible to reach. Because there is no sword hanging over their heads – like the threat of a government shutdown or default on the debt – experts say it’s not essential that a deal be reached now. As a face-saving gesture, both sides could ask the Congressional Budget Office to “score” their last, best offers, knowing that neither plan could win a majority vote.
Pros: Committee members could evade responsibility for deep spending cuts or tax increases certain to rile conservatives and liberals alike while arguing they did their best.
Cons: Failure would be a major embarrassment for Congress, whose approval rating has plummeted to only 9 percent. And there’s the danger of roiling the markets and inviting another downgrade of the U.S. credit rating.
Score a last-minute touchdown – There’s still plenty of time to make a deal (two or three days is an eternity in last-minute congressional negations), and the two sides could decide to confound the experts and strike an agreement. While globe-trotting President Obama is clearly on the sidelines in this contest, Republican House Speaker John Boehner and Democratic Senate Majority Leader Harry Reid signaled interest earlier in the week in possibly knocking heads to push through an agreement –and they still may do that. But the big question remains whether Boehner is willing to break with the Tea Party wing of his party and make further concessions on taxes to force the Democrats to go along with deep cuts in entitlements and domestic spending.
Pros: Congress would finally demonstrate it is serious about the deficit and can avoid more messy talks during an election year.
Cons: They might come up with a hastily drawn deal that they can’t sell to the full Congress, which must vote on recommendations by Dec. 23.
Punt the ball – The Super Committee indeed has super powers and can do pretty much what it wants. The committee could vote to agree on a chunk of spending cuts, including changes in Medicare and Social Security, and set a marker for increased revenues that would be left to the permanent congressional committees – mainly the House Ways and Means Committee and the Senate Finance Committee – to determine next year. While that would almost certainly produce an ugly political showdown just as the election campaigns heat up, Congress would be reverting to “regular order” by allowing the committees with jurisdiction over taxes and entitlement to have their say.
Pros: Panel members could argue that shifting responsibilities to committees that specialize in taxes and health care is smart because it would allows the experts to find sensible savings solutions and draw on a broader range of political views.
Cons: There’s no guarantee the permanent committees could reach a consensus. And former CBO Director Alice Rivlin said that putting off big tax and spending issues until after the 2012 election could risk a double-dip recession.
Go into overtime – If the members decide they are tantalizingly close to a deal, they could ask Congress to grant them some extra time to work things out before the end of the year.
Pros: They’ve come this far and might still come up with a magic Hail Mary pass to get them across the goal line.
Cons: There is still no guarantee they could score that touchdown and they might look even sillier after raising false hopes.
Change the rules -- Failure to reach agreement would automatically trigger deep cuts totaling $1.2 trillion to defense and domestic programs, beginning in 2013. Both Republicans and Democrats fear the automatic cuts, or “sequestration,” would have devastating effects on the Pentagon and important domestic programs. With more than a year before those cuts would begin to bite, Congress could vote to eliminate the “trigger” and spare those programs draconian reductions.
Pros: If ever there were an action that illustrated Congress’s lack of determination in tackling the deficit, this would be it.
Cons: Obama says he would veto any effort to eliminate sequestration.
Most Valuable Player -- If any committee member deserves a political trophy, it would be Republican Sen. Pat Toomey of Pennsylvania. When Toomey was first appointed to the panel, it was seen as a nod to the Tea Party which helped sweep him into office last year. But over the past few months, he has morphed into a key negotiator. It was Toomey who authored the GOP $1.5 trillion deficit plan that would raise $500 billion in new revenue by closing some loopholes and capping deductions.
